The energy challenge
With population and incomes projected to rise, the global energy challenge is to manage and meet demand affordably, sustainably and securely
Population and economic growth are the main drivers of global energy demand. The world’s population is projected to increase by 1.3 billion from 2011 to 2030, with real income likely to double over the same period. These factors will lead to increased energy demand and consumption. Energy and climate policies, efficiency gains and a long-term structural shift in fast-growing economies away from industry and towards less energy-intensive activities will help to restrain any increase, but the overall trend is likely to be one of strong growth. We expect demand for energy to increase by as much as 36% between 2011 and 2030, with nearly 93% of the growth to occur in non-OECD countries.
While energy is available to meet growing demand, action is needed to limit carbon dioxide (CO2) and other greenhouse gases being emitted through fossil fuel use. Burning of fossil fuels can also raise local and regional air quality issues.
Energy security represents a challenge in its own right. More than 60% of the world’s known reserves of natural gas are in just four countries, and more than 80% of global oil reserves are located in nine countries, most of which are well away from the hubs of energy consumption.
Meeting growing demand for energy that is secure and sustainable will also present an affordability challenge as the availability of easily accessible fossil fuels slowly diminishes, with many low carbon resources remaining costly to produce at scale.
Craig Mackenzie, Head of Sustainability, Scottish Widows Investment Partnership
"There are two core contributions the oil and gas industry can make in the context of climate change. By displacing coal in power generation, natural gas can help to reduce global carbon emissions in the next few decades. Longer term it's harder to square the growth in oil and gas with action on climate change. To secure its future in a carbon constrained world, the oil and gas industry needs to give priority to accelerating action on carbon capture and storage."
Meeting the challenge
We believe that governments must set a stable and enduring framework for the private sector to invest and for consumers to choose wisely. Governments need to provide secure access for exploration and development of energy resources; define mutual benefits for resource owners and development partners; and establish and maintain an appropriate legal and regulatory environment.
Saving energy through greater efficiency addresses several issues. It helps with affordability – because less energy is needed. It helps with security – because it reduces dependence on imports. And it helps with sustainability – because it reduces emissions. Innovation can play a key role in improving technology design, process and use of materials, bringing down cost and increasing efficiency. In transport, for example, we believe that efficient combustion engines and power train technologies, combined with the use of biofuels, could offer the most effective pathway to a secure, lower-carbon future. For these reasons, we expect efficiency to remain high on the agenda through to 2030.
A diverse mix
We believe that, increasingly, the global energy challenge can only be met through a diverse mix of fuels and technologies. A broad mix can enhance national and global energy security while supporting the transition to a lower-carbon economy. This is one reason why BP’s portfolio includes oil sands, shale gas, deepwater oil and gas production, biofuels and wind.
Oil and natural gas
Oil and natural gas are likely to play a significant part in meeting demand for several decades to come. We believe these energy sources will represent about 53% of total energy consumption in 2030. Even under the International Energy Agency’s most ambitious climate policy scenario (the 450 scenario1), oil and gas would still make up 50% of the energy mix in 2030, with combined demand projected to exceed current levels in absolute terms.
We expect oil to remain the dominant source for transport fuels, accounting for as much as 90% of demand in 2030.
Natural gas, in particular, is likely to play an increasingly strategic role. It is a lower-carbon fuel that is increasingly secure and affordable. When used in place of coal for power, it can reduce CO2 emissions by half.
New sources of hydrocarbons are more difficult to reach, extract and process. This will require BP, and others in our industry, to develop new technologies to boost recovery from declining fields and commercialize currently inaccessible resources. Greater energy intensity could be required to extract these resources, which means operating costs and greenhouse gas emissions from operations are likely to increase.
Renewables, such as biofuels and wind energy, will play a major role in addressing the challenges of energy security and climate change over the long term. Renewables are already the fastest-growing energy source, however, they are starting from a low base. With a few exceptions, renewables are not yet competitive with conventional power and transportation fuels. Sufficient policy support is required to help commercialize effective lower-carbon options and technologies, but renewables will ultimately need to become free from subsidy and commercially self-sustaining.
1From World Energy Outlook 2012. ©OECD/International Energy Agency 2012, page 553. The IEA’s 450 policy scenario assumes governments adopt commitments to limit the long-term concentration of greenhouse gases in the atmosphere to 450 parts-per-million of CO2 equivalent.